Many entrepreneurs constantly face the battle for cashflow and a lot of times, money (the lack of it) is the reason why start-ups fail even before they’ve started. I have read many books and blogs where the general consensus is to come up with a brilliant idea, write up a solid business plan and pitch it to investors with the hope of getting funded. In reality however, it’s often very difficult to get money from external sources, not to talk of all the strings that are attached to striking such deals.

The most notable sources of external funds these days are the Venture Capital firms, Angel Investors and bank loans. The trouble for new entrepreneurs is that these people are not keen to invest in “unproven people”. Investors will tell you that they invest in people and not ideas, so if you are a first time start-up builder, your chances of securing money from these people are very small. VCs invest several millions, sometimes billions in companies and they prefer to invest in accomplished companies looking to grow. Angels often always tend to do the same but there are Angels who do invest in newbies, you just have to search extensively to find the right one. As far as bank loans go, if you don’t have solid collateral, you can kiss that source goodbye as well.

I am a fan of bootstrapping and it’s my preferred route for raising funds although I know there will come a time when I will need external funds. For now however, my idea is that I am still in the early stages of business development so I will make the most of my limited funds. There are two obvious advantages of bootstrapping that immediately jump out:  (a.) I have more time to focus on business development when I cut the time I spend looking for and contacting investors (who would probably tell me I am too risky to invest in anyway). (b.) I can successfully keep out other people from owning part of my company and telling me what to do or asking me to re-direct my dream because they want to make quick money.

There are many ways to bootstrap. Now they might not be the easiest way to go about things and it will certainly affect you as an entrepreneur personally. Some notable means include borrowing from friends and family, using personal savings, emptying trust funds (if you have one), taking mortgages e.t.c.

Some additional tips to help you bootstrap.

Be prudent: Realize that you don’t have tones of investor money to spend, you are infact spending your own money. Make sure that you don’t spend if you don’t have to. You don’t need to get an office space when your bedroom is spacious enough to take an additional computer table and chair. Make ever dollar count.

Cut Employee and overhead costs. Many start-ups out there have only two employees and there’s a reason for that. They are trying to save money and cut down on unnecessary expenses. If you can do it yourself, then make sure to. There are several other means of getting help: part-time, unpaid internships, outsource e.t.c. These are more cost effective ways of getting someone else on board.

Be sure about your decisions. When bootstrapping, never use your own money to “test the waters”. If you are not sure about something, then do your research, connect with people and seek advice. Many people believe Adwords is the way to go when looking to advertise, but not everyone is adept to what it takes to make it work. If you don’t know how to make the most of it you will suffer big time and lose a lot of valuable funds.

Word of Mouth: Sell yourself in the most cost effective way, word of mouth. Tell people and build contacts.

Try to re-invest early profit: I know of a T-shirt company owner who bootstrapped his way to several thousands of dollars in early profit and if you ask him today what his best business move was, he will tell you how he re-invested every dime of it into the company. The more you re-invest, the longer you keep out external investors, which is never a bad thing. It’s not exactly smart to take out all your profit and use it for personal purposes if you are really looking to grow your brand.

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